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Nautilus eyes up to $100m in funding requirements

TORONTO (miningweekly.com) – While Nautilus Minerals, aiming to become the first deep-sea metals producer by the end of next year, still needs to raise $90-million to $100-million to fully fund the project, it has about two years to do so, CEO Steve Rogers said on Thursday.

The Aim- and TSX-listed company last year completed a near-$100-million private placement, with Oman’s Mawarid Mining, a unit of oil and gas producer MB Holdings, taking up a 10% stake for $50.1-million.

“The $100-million that we raised last year was a big step forward,” Rogers told Mining Weekly Online.

Anglo American subscribed for shares in that deal to keep its ownership of Nautlius at 11%, and Russia’s Metalloinvest did the same to maintain its 21% interest.

The funding allowed the firm to recommence the build of its seafloor mining system at the flagship Solwara 1 project in the Bismarck Sea, off Papua New Guinea’s coastline.

The government of that country will stump up about $150-million of the capital costs as a joint venture (JV) partner, but Nautilus will still be looking to raise additional financing.

“We will need to find probably another $90-million to $100-million to fully fund the project. We have the next two years to raise it, so we’re not in a desperate rush right now,” said Rogers, adding that it had alternatives to selling additional stock.

“It’s not a given that we will come back to the equity markets,” he commented.

Solwara 1 is on track to start producing in the last quarter of 2013, after the global financial crisis delayed it by about two years, and will be the first deep-sea mining operation to come on stream, as mining companies scour the world for near frontiers to dig up.

Soaring metals prices have provided a strong impetus for companies such as Nautilus to look in interesting places for new deposits.

While Nautilus is ahead of a growing pack, China, Russia, Korea and Japan all have permits to scour the sea bed for potential high-grade deposits of copper and gold.

“There will be a deliberate and significant move into marine-based mining operations,” Rogers said.

He compares the shift to what occurred in the oil and gas industry, where negligible production came from offshore sources in the 1950s. Now, over 30% of the world’s oil and nearly 25% of its gas output comes from offshore production.

“I can see that same trend here occurring with regards to metals. I don’t anticipate a gold rush, but it will be a slow steady growth,” said Rogers.

One of the benefits to building mines on the bottom of the ocean are lower capital costs than comparable operations on land.

Where Nautilus is building Solwara 1 for about $400-million, porphyry mines that produce similar amounts of metals cost in the range of $1-billion to $1.2-billion.

Projects can also start producing a lot quicker – Rogers anticipates a period of around two-and-a-half years to three years for development, once Nautilus has proved the process at its pioneering flagship mine, while it often takes 8 to 10 years to bring a land-based deposit into production.

Assuming Solwara 1 proves a success, the company is looking to build more.

“I would suggest by the end of 2016 or early 2017 we could have a second vessel operating,” said Rogers.

“Our vision for the future would be to have multiple vessels operating around the Pacific and even in other parts of the world as well.”

Part of that production may come through JVs with other companies that could provide capital and benefit from Nautilus’ skills.

HOW IT WORKS

Nautilus will make use of three giant pieces of equipment to mine the ocean floor, some 1 600 m below surface, pumping the ore as a slurry up to a ship, and then barging it to a storage facility in Papua New Guinea.

The first machine will go in to prepare the mining areas, to be followed by another large piece of equipment that resembles and works in a similar way to the continuous miners that underground coal mines often use.

Each is taller than seven meters, and more than twice that in length.

A giant vacuum cleaner then sucks up all the broken ore, as a slurry, pumping it up to the vessel. The dewatering plant on the vessel separates the ore and the filtered return water is sent back down another pipe to the sea floor.

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Once it has been barged to the storage facility, the ore will go to a concentrator and finally to refineries.

Rogers said Nautilus will initially either toll treat the ore or simply sell it, but will start a feasibility study on building a concentrator in Papua New Guinea once production starts.